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The Financial Express

China's military drills near Taiwan disrupt key shipping lanes

| Updated: August 05, 2022 17:15:22


A man watches a CCTV news broadcast, showing a fighter jet during joint military operations near Taiwan by the Chinese People's Liberation Army's (PLA) Eastern Theatre Command, at a shopping centre in Beijing, China, August 3, 2022. REUTERS A man watches a CCTV news broadcast, showing a fighter jet during joint military operations near Taiwan by the Chinese People's Liberation Army's (PLA) Eastern Theatre Command, at a shopping centre in Beijing, China, August 3, 2022. REUTERS

China's military exercises in the waters around Taiwan have prompted some ships to navigate around the Taiwan Strait and give the island a wide berth, disrupting key trading routes for cargo and commodities sailing around the world, analysts said, Reuters reports.

Angered by US House of Representatives Speaker Nancy Pelosi's visit to Taiwan, China on Thursday began four days of military drills around the disputed island, including firing live missiles and deploying fighter jets.

Although Taiwan's ports are operating as normal, some cargo ships and oil tankers are re-routing around the island to avoid confrontation with the Chinese military, adding around half a day to voyages, analysts and ship owners said.

It is a reminder of the severe impact a conflict over Taiwan could have on global trade given the 180-km wide (110-mile) Taiwan Strait and a shipping lane to the island's east are major routes for ships transporting goods from East Asia to the United States and Europe.

"Some ships have already taken precautions and are proceeding east of the island instead of through the Taiwan Strait," said Niels Rasmussen, chief analyst at shipowner association BIMCO.

WARNING SIGN

Disruptions at Chinese ports caused by COVID-19 lockdowns played havoc with global supply chains earlier this year, helping to fuel record inflation around the world.

"Though China's action has yet to significantly disrupt ocean freight operations, a prolonged version certainly could," said Zvi Schreiber, CEO at Freightos shipping index.

"Regional conflict could force vessels to take alternative routes, adding transit time, disrupting schedules and causing further delays and costs."

Airlines have also cancelled flights to Taipei and rerouted others to avoid nearby airspace that has been closed to civilian traffic during the Chinese military exercises.

Pelosi became the highest ranking US government official to visit Taiwan in 25 years this week, in a high-stakes move she said showed unwavering US commitment to the self-ruled island.

China, which claims Taiwan as part of its territory, responded by deploying fighter jets, bombers and warships to the strait and all around the island in a show of military strength.

Large oil tanker owners have since raised security alert levels and are diverting vessels, according to Anoop Singh, head of tanker research at Braemar, a shipping risk manager.

Shipping insurance groups have also posted alerts to members, urging caution in navigating around Taiwan.

Though tankers and container vessels were still docking normally in Taiwan, analysts warned even minor delays for ships were a concern when global trade is still recovering from the impact of pandemic lockdowns.

"As ships are utilised for by-passing the tensions and not for expediting trade it's a move in the wrong direction - meaning more hardship for supply chains," said Peter Sand, chief analyst at ocean freight platform Xeneta.

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